The decision five years ago to sell Telkom’s 50% stake in Vodacom is “recognised as one of the company’s biggest mistakes”, says chief strategy officer Miriam Altman. But Telkom can’t afford to dwell on the past and needs to focus on building its core fixed-line business and finding a solution to its loss-making mobile operation.
“Would Telkom have succeeded in building Vodacom in the same way [as Vodafone has]? I don’t know. But I think [selling Vodacom] was one of Telkom’s biggest mistakes,” Altman says.
Telkom confirmed last week that it is in discussions with unnamed parties with a view to resolving the challenges facing its mobile arm, Telkom Mobile, which it launched after disposing of its interest in Vodacom. In the six months ended September 2013, Telkom Mobile lost R773m before interest, tax, depreciation and amortisation. That was a deterioration from a loss of R716m in the same period a year ago.
TechCentral reported last week that a plan to “de-risk” Telkom Mobile could lead to a transaction with rival MTN. Although details remain sketchy, the two operators are in sensitive discussions about a possible deal, according to two separate and well-placed sources. Telkom Mobile already roams on MTN’s network in areas where it doesn’t have coverage — mainly outside the cities and bigger towns.
“I don’t think there’s a sense we will succeed as a fourth operator on organic growth [alone],” says Altman. “I think there were other strategic mistakes, from pink branding, to names, to market positioning, but that was then and this is now and now we’re reviewing our options.”
Altman says it’s “very unlikely” that Telkom Mobile will succeed if has to rely on organic growth. “It’s not a prospect,” she adds, but declines to comment further on possible market consolidation.
She says Telkom must play to its strength, and that’s in fixed-line broadband. “Fixed line is our core activity. As it turns out, that’s a good thing to be in. Everyone in the industry knows that’s the case, and a testament to this is that the mobile operators rely on our network.”
Although Telkom “will always have a mobile product”, it will be “predicated” on the fact that Telkom is first and foremost a fixed-line operator.
“We want a mobile offering, but we’re not going to be a dominant mobile operator,” Altman says. “We want a converged product that helps us build our fixed-line connectivity storyline.”
She admits that Telkom needs to increase the growth in demand for fixed broadband digital subscriber lines. “DSL growth should be much higher and we are looking at options to do that.”
The roll-out of very high-speed DSL, known as VDSL, offering speeds of up to 40Mbit/s, forms a key part of the company’s broadband growth plan, as does better customer service. “We would like to see double digit growth [in DSL] … through an improved proposition.”
Telkom is rolling out VDSL to its 600 most-used exchanges countrywide. “We have to do something that is better [than mobile],” says Altman. “We have to get to a point where we are faster and more reliable and have better bundled services, where mobile data is really for mobile because you need it on the run.”
Services like Internet protocol television and video on demand are also on the cards. “We will get to some kind of triple play, but we’re still thinking about how that’s going to work. We are absolutely not going to do another Telkom Media and will explore partnerships.” — (c) 2013 NewsCentral Media
